UPDATE: IBM Pick Of Cloud Startup Shows More Rivals For Oracle
April 30 2012 - 2:24PM
Dow Jones News
Much has been made of the rivalry between Oracle Corp. (ORCL)
and Salesforce.com Inc. (CRM) in cloud computing, but last week a
venture-backed company from San Francisco stepped from the shadows
to snap up one of the richest contracts in business for software to
manage sales, marketing and customer relationships.
International Business Machines Corp. (IBM) disclosed it will
replace its Oracle/Siebel customer relationship management software
with products made by SugarCRM, an 8-year-old company backed by
Draper Fisher Jurvetson and two other venture funds.
The contract demonstrates how quickly a relative startup can
establish credibility in the fast-moving market to provide
Web-based software, frequently referred to as the cloud. The
contract, which IBM was shopping as far back as two years ago, also
shows how rivalries between technology giants can impact business
relationships.
"IBM was the world's largest deployment of Siebel applications,
and we view this replacement as yet another indication of the
pressure on Oracle's application business," said Pat Walravens of
JMP Securities.
To be sure, this one contract is just a small part of Siebel's
business, and other significant clients--such as General Electric
Co. (GE) and Nordstrom Inc. (JWN)--remain stalwarts, by all
reports. Nonetheless, the deal marks the second major corporation
to replace its Siebel platform in the past 12 months. In the fall,
Hewlett-Packard Co. (HPQ) selected Salesforce.com to replace
Siebel.
Combined, the decisions are "momentous," said analyst Mark
Murphy of Piper Jaffray, "because IBM and H-P were two of the
largest Siebel deployments to our knowledge."
It's not surprising that IBM and H-P, two of Oracle's biggest
competitors, would want to replace Siebel installations they put in
place before Oracle bought Siebel for $5.8 billion in 2005.
Oracle declined to comment for this story. IBM declined to
comment about vendor relationships. A spokesman for Salesforce.com
said the company didn't compete for the IBM business.
For SugarCRM, the IBM deal gives the company more legitimacy and
shows its ability to secure key contracts against larger foes.
SugarCRM is building a business aimed at delivering management
services around a core of open-source software that clients can
deploy in a private or public cloud.
"The open-source structure is highly disruptive," said Nick
Halsey, chief marketing officer and head of corporate development
for SugarCRM.
The company distributes its software through about 400 resellers
world-wide. Since the software code is open source, potential
customers easily can test the product and customize it at will
after acquisition. SugarCRM earns revenue from offering five levels
of service, each built around the same core software.
Halsey declined to confirm or deny whether IBM was replacing its
Siebel installation with SugarCRM. He did say recent "buzz" about
the company was "because several of our customers have opened their
kimono about what they are doing with our products."
A lot of cloud business is on the move. Already about 40% of the
$10 billion customer relationship management software business has
moved online, which allows companies to better organize and
distribute the content. As a result, software companies are
scrambling to both buy and build cloud offerings of their own.
Oracle is purchasing Taleo Corp. (TLEO) to acquire the smaller
company's cloud-based HR management tools and Oracle bought
RightNow for its customer's service suite. Both will become
components of a cloud service Oracle intends to launch late this
year. SAP AG (SAP) has acquired cloud-based HR software company
SuccessFactors. Microsoft Corp. (MSFT) delivers its DynamicsCRM
software online and recently announced it will begin delivering its
enterprise resource planning software as a cloud service as
well.
--By Steven D. Jones, Dow Jones Newswires, 360-834-1865,
steve-d.jones@dowjones.com.
--Shara Tibken contributed to this article.
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